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Amid declining sales, McDonald’s considers REITs

Still, some say the burger giant should cling to its holdings

McDonald's
McDonald's

McDonald’s is a real estate goldmine with holdings estimated at about $40 billion worldwide. And with sales down for three years in a row, some analysts suggest that the fast food giant could offer its shareholders better returns through a real estate investment trust.

Glenview Capital Management chief Larry Robbins said in a letter to investors that by entering a publically traded trust, McDonald’s could access at least $20 billion in value, according to the Wall Street Journal

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Still, some analysts are against the idea, arguing that the burger giant already derives huge amounts of revenue from its real estate holdings. About a fifth of McDonald’s $27.4 billion in total revenue last year came from rental income from franchisees. And rent payments from franchisees have actually risen 26 percent over the past five years, to $6.1 billion in 2014, according to the Journal.

“McDonald’s is facing a lot of headwinds, like minimum wage increases and more competitors,” Bob Schulz, managing director at Standard & Poor’s Ratings Services, told the Journal. “This would be an additional complication for management’s time.” [WSJ] – Christopher Cameron

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